What is Liquidation?

Liquidation is a risk management mechanism that automatically closes a futures position when the account's available margin is no longer sufficient to maintain the position.

This occurs when the Mark Price reaches the position's liquidation price. The liquidation process is designed to help prevent further losses that exceed the available margin.

Note: Liquidation is triggered based on the Mark Price, not the Last Price.

For more information about Index Price, Mark Price, and Last Price, please refer to the Understanding Index Price, Mark Price, and Last Price in Futures Trading article.

What is the Liquidation Price?

The liquidation price is the estimated price at which your position will enter the liquidation process if your margin becomes insufficient.

Your liquidation price is affected by several factors, including:

• Position size
• Leverage
• Margin mode (Cross Margin or Isolated Margin)
• Available margin
• Additional margin added to the position

You can view your estimated liquidation price on the position panel while your position is open.

What is the Bankruptcy Price?

The Bankruptcy Price is the price at which a position's remaining margin is fully exhausted during the liquidation process.

Once the liquidation process begins, the liquidation engine takes over the position. The Bankruptcy Price serves as the internal reference price for this process and helps ensure that losses do not exceed the available account equity.

Unlike the Liquidation Price, the Bankruptcy Price is not intended as a trading reference for users.

Why does BloFin use Mark Price for liquidation?

BloFin uses the Mark Price instead of the Last Price to determine liquidation in order to reduce unnecessary liquidations caused by temporary market volatility or abnormal price fluctuations.

The Mark Price reflects the fair market value of the contract and provides a more stable and reliable reference for risk management.

What happens during liquidation?

When the Mark Price reaches your liquidation price, the following process occurs:

1. Your position enters the liquidation process.
2. Eligible open orders associated with the position may be canceled to release occupied margin.
3. The liquidation engine closes the position according to the platform's risk management mechanism.

4. If any remaining funds are available after settlement and applicable fees, they will be returned to your account.

    

Why were my open orders canceled after liquidation?

When a position is liquidated, BloFin may automatically cancel eligible open orders associated with that position.

This is part of the platform's risk management mechanism and helps:

• Release the margin occupied by pending orders.
• Prevent additional exposure after the position has been liquidated.
• Ensure sufficient margin is available during the liquidation process.

Depending on the order type and position status, pending TP/SL orders or other related orders linked to the liquidated position may also be canceled automatically.
For detailed cancellation rules, please refer to Order Cancellation Logic During Liquidation.

Can liquidation be avoided?

While liquidation cannot always be avoided, you can reduce the risk by:

• Using appropriate leverage based on your risk tolerance.
• Maintaining sufficient available margin.
• Adding margin to your position when necessary.
• Setting Stop Loss (SL) orders to manage downside risk.
• Monitoring your Margin Ratio regularly, especially during periods of high market volatility.

Frequently Asked Questions

Why was I liquidated even though the market price did not reach my liquidation price?

Liquidation is triggered based on the Mark Price, not the Last Price displayed on the trading chart. During volatile market conditions, these prices may differ.

What is the difference between the Liquidation Price and the Bankruptcy Price?

Why doesn't the Bankruptcy Price appear on the K-line chart?

The Bankruptcy Price is an internal risk management value used during the liquidation process. It does not necessarily correspond to an actual market transaction.

Since K-line charts display only actual executed market prices, the Bankruptcy Price is not shown on the chart.

This mechanism helps ensure orderly liquidation while supporting the platform's overall risk management.

Why does the system use the Bankruptcy Price instead of the Liquidation Price?

The Liquidation Price is the price at which the liquidation process is triggered.

The Bankruptcy Price is the price at which the remaining margin is fully exhausted.

During liquidation, the liquidation engine uses the Bankruptcy Price as the internal reference price for taking over the position. This helps:

• Prevent losses from exceeding the available account equity.
• Reduce the risk of negative account balances.
• Protect both users and the platform by ensuring the liquidation process is completed efficiently.

Why were my open orders canceled after liquidation?

Open orders associated with a liquidated position may be canceled automatically to release occupied margin and prevent additional exposure. This is a normal part of BloFin's risk management mechanism.

Why were my TP/SL orders canceled?

If your TP/SL orders are linked to a position that has been liquidated, they may also be canceled automatically because the underlying position no longer exists.

Can I recover a liquidated position?

No. Once a position has been successfully liquidated, it cannot be restored. You may open a new position if you wish to continue trading.

How can I reduce the risk of liquidation?

You can reduce the risk of liquidation by:

• Using lower leverage.
• Maintaining sufficient margin.
• Adding margin when necessary.
• Monitoring your Margin Ratio.
• Setting Stop Loss (SL) orders to help manage downside risk.